The United States just announced more tariffs on $200 billion worth of Chinese goods. The goods include fish, luggage, tires, handbags, baseball gloves, furniture, apparel and more. The tariffs are set to go into effect in September.

China has declared they intend to protect their “core interests,” but they provided no details at the time this article was published.

Effects are unpredictable

The effects of trade wars, like those of big storms, are hard to predict with accuracy. They may leave one company virtually unscathed and devastate another in the same industry.

They ricochet through the economy. Retaliation may escalate in many forms.

Besides countervailing tariffs, countermeasures may also include selective slowdown of administrative processes such as customs clearances or safety inspections. It may also involve increased regulation and more red tape in doing business with trading partners.

U.S. steel producers may not gain the long-term benefits they expect from protective tariffs. China is poised to flood global markets with lower-priced steel.

Manufacturers that use U.S. steel are likely to be at a price disadvantage versus competitors that don’t. Demand for U.S. steel could drop, ultimately hurting U.S. producers.

Here we are with the U.S. slapping on tariffs on the import of steel and aluminum, and potentially many other products, which will drive up the sales price of our products and our production here in America.

But the rest of the world doesn't have the same tariff applications. They're going to enjoy much cheaper prices.

The Chinese have been overproducing steel for some time and this is driving down raw stock and steel products prices that are sold around the world. While American steel products get more expensive, Chinese products are priced for their advantage. The Chinese do not necessarily need to sell in the US market.

American products that include American steel are going to be prohibitively expensive in comparison. The result will be that we won’t be able to export our products or compete in world markets.

Despite the obvious risks, some companies will benefit from surprising windfalls. If they offer lower-cost substitutes for items subject to new tariffs, they’ll likely see a surge in demand.

But fast-growing demand disrupts supply chains just as much as fast-declining demand does.

Take action now

Don’t wait until a threat appears inevitable. If you procrastinate, you may limit your options to contain the damage or to take advantage of opportunities.

Speaking figuratively, the fresh water, flashlights, and batteries may be sold out by the time you show up to buy them.

Here are 16 things you can start doing now:

1. Assemble a team for emergency preparedness.

Organize a “tariff impact team.” Make it multifunctional.

The business functions that participate will vary with the kind of business you’re in.

If your company does manufacturing, include Procurement, Manufacturing, Legal (including Compliance), and Finance on the team. We suggest you also add Quality Control, Supply Chain, Logistics, Sales, and Marketing.

If your company does wholesaling, also add someone from your demand forecasting and replenishment teams. They will be able to spot early changes to demand and inventory levels.

2. Put your team and your company on high alert.

Are you in the direct path of the storm?

What alternative paths appear likely, based on what you can see today?

When might it hit your shore? What early warnings might you look for in your operations?

Is demand for some items falling unexpectedly? Is it increasing unexpectedly for others? Watch for possible “knock-on effects.” If tariffs force you to increase pricing for some items, your customers may switch to alternatives at lower prices. Be prepared to respond quickly to such changes.

Are customers canceling orders? Are some items getting harder to buy? Where are prices increasing? Which lead times are getting longer?

Talk to key customers. This is an important time for maintaining trust. Understand how a price increase may affect their business. If your prices must increase, make sure they know why. If you can offer them alternative products, be sure they’re aware of it.

Talk to salespeople. Salespeople are often great conduits of timely information. Consult both your own sales team and those of vendors who call on you. They’re likely to be plugged into information from diverse sources. They can provide a good view across many companies, including your competitors.

Talk to your own salespeople or customer service reps. Work on what to say so you don’t lose potential business.

Watch your competitors. If they operate a website that shows pricing, see how their prices change for items that compete directly with yours. Also watch for promotions of items that could take sales away from any items whose prices you’ve increased.

Talk to your suppliers. Your suppliers may not understand their own vulnerabilities. Or they may not want to reveal the challenges they face for fear of losing your business.

Even so, you can read between the lines of the questions they try to avoid answering.

What trends are they seeing with their suppliers?

How well could they accommodate a change in your order quantities? Can you negotiate more flexible lead times or commercial terms? Can they ship equivalent items from a plant whose production isn’t affected by tariffs?

Talk to partners and allies. They may be able to offer information and perspectives you can’t get from any other source.

Stay in touch with trade associations. They can often offer up-to-date, highly specialized information you won’t find in the general business media. If they run a lobbying office, they can also provide important political perspectives and advice.

Establish a way to capture and share information efficiently. If your company doesn’t already use a software tool for sharing notes, consider doing so – at least for your tariff impact team. The cost is low, and the benefits can be great.

4. Be alert for possible fraud, waste, abuse, and quality issues.

When tariffs and other government actions disrupt supply chains, companies have to pivot fast.

When you quickly shift sourcing strategies and vendor relationships, you may not vet your new sources thoroughly enough. That can open your company to the risk of fraud and financial loss, including damage to your reputation.

This warning comes from Mark Pearson and Larry Kivett, writing in Treasury & Risk. The two are partners in the Risk and Financial Advisory practice at Deloitte.

You may be able to beat some increases by getting your goods across borders before new tariffs go into effect. Can you expedite production or shipping? Can you stock up in inventory in advance of price increases?

The following idea is not from Frank Debets. It’s a method wholesalers and retailers have used for decades to increase profits on price increases and promotions.

If your company is a retailer or a wholesaler, you might view a new tariff as an opportunity for a “forward buy.”

In anticipation of your tariff-related cost increase, you purchase more inventory than you normally would. You raise your selling prices immediately on goods you receive before the tariffs apply. That gives you extra gross margin.

This can present a big opportunity for profit if you do the right analysis to buy the optimal amount.

7. Reroute product.

8. Reclassify.

Countries usually base their import tariffs on customs classifications of goods. Frank Debets notes that many companies can’t provide documentation to support the customs classification of one-third to one-half of their goods.

By reviewing your customs classifications, you may be able to avoid some tariffs.

9. Reduce the valuation of goods subject to tariffs.

Import duties generally apply “ad valorem,” to a designated percentage of an item’s stated value. Some companies weren’t careful about stating the value of goods when duties were low. But when tariffs are high, it’s important to declare an accurate value.

You may be able to legally reduce the valuation of goods that cross borders. Check your options. They vary by country.

10. Document your compliance.

With new tariffs in place, customs agents are likely to expect more thorough verification of compliance. If you claim that affected products didn’t originate in China, be prepared with documentation to prove it.

15. Keep your website and product catalogs up to date.

16. Update your technology and information systems.

Many new technologies enable greater agility and flexibility. If you haven’t already implemented them, they may not help you much with the current round of tariffs. But they can help you prepare for future uncertainty.

As the proverb goes, the best time to plant a tree was 20 years ago. The next-best time is today.

Generix Group does not offer software in all the categories listed below. We include the names of a few vendors to help you start your research.

Systems for manufacturers

Supply chain risk planning and assessment. New software applications can help you map the supply chains for all the items in your inventory. They can also alert you when events such as storms or new tariffs are likely to disrupt your supply chains. Some can do so even for your suppliers’ suppliers.

It’s especially useful for managing light manufacturing, assembly, or kitting. Generix Group North America offers an MES that’s built on the same flexible technology as the Generix Group WMS. The two systems need no integration to each other, and they are easy to configure or reconfigure.

Manufacturing planning systems. These systems enable you to plan demand for your manufactured products. They are normally linked to MRP systems. They help you buy the right ingredients or components in the right quantities for your manufacturing processes. They also help you schedule production.

Accurate forecasting will become even more important when tariffs disrupt established demand patterns.

Systems for retailers and wholesalers

If your company is in the wholesale or retail business, also consider these software applications:

Demand forecasting and replenishment. These systems largely automate the process of buying the right amount of inventory to fulfill changing levels of demand. The best of such systems offer lead-time forecasting capabilities. They adjust safety stock levels when lead times become more variable.

Price optimization. This software helps you set optimal prices for finished goods sold at retail. It models the price elasticity of demand based on historical sales data.

Such systems accumulate data that helps retailers understand the effects on revenue and profit when retail prices change. Retailers can perform that analysis at the item level, store by store.

Assortment optimization. This software helps retailers determine the most profitable mix of items in a merchandise assortment.

If the cost goes up for items in an assortment, should the retailer pass the price increase on to customers? Or is it ultimately more profitable to take the hit on gross margin? Or to find substitute items? This software can help make these decisions.

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About Generix Group North America

Generix Group North America has been developing and implementing their best-of-breed supply chain optimization systems. SOLOCHAIN is a world class Warehouse Management System (WMS) and Manufacturing Execution System (MES), with implementation sites spanning the globe. This solution allows manufacturing as well as logistics companies to optimise their operations across the supply chain. SOLOCHAIN is a web-based application that provides a scalable and easily adaptable platform, that integrates the latest technologies. Fast, intuitive user interfaces translate into better control, increased mobility and a more productive work force